States Target Politically Active Nonprofits

States Target Politically Active Nonprofits

Article excerpt

Tax-exempt groups that spent hundreds of millions on the 2012
elections without disclosing their donors have stirred no response
from federal regulators but have drawn the ire of state officials
who are moving aggressively to restrict them.

From California to Idaho, Montana to Maine and New York, state
attorneys general and election officials are fighting in court to
force big-spending tax-exempt organizations to comply with their
disclosure laws.

State officials and lawmakers have also proposed new disclosure
rules, in the form of regulations or legislation, along the lines of
the DISCLOSE Act, the campaign finance transparency bill that
stalled last year in Congress.

By contrast, the IRS and the Federal Election Commission have
largely ignored a long string of complaints by watchdog groups that
big-spending nonprofits violated tax and campaign finance laws in
the recent election.

In the first presidential election since the Supreme Court's 2010
Citizens United v. FEC ruling, outside groups spent record sums,
many without disclosing their donors.

"It's clear that because of the failure of the federal government
to act in this arena, it's necessary for the states to become more
active," said Ann Ravel, chairwoman of the California Fair Political
Practices Commission.

While states have no jurisdiction over whether groups violated
federal tax or campaign finance laws, they have the right to enforce
their own disclosure rules, said Paul S. Ryan, senior counsel at the
Campaign Legal Center.

"They can't undo this unlimited money" following Citizens United,
Ryan said. "But the Supreme Court has strongly supported disclosure.
And the states have broad latitude to require groups that are
spending money to influence their state's election to disclose where
they're getting that money."

The Fair Political Practices Commission won a court battle last
year to force an Arizona-based nonprofit dubbed Americans for
Responsible Leadership to disclose its donors. The group had given
$11 million to a California committee that engaged in two ballot
initiative fights involving tax hikes and labor union fundraising.
But the money had originated and passed through two other non-
disclosing tax-exempt groups.

"While that information was better than nothing, it was
nevertheless not satisfactory to us," Ravel said. Her office is
drafting legislation that would give the commission the authority to
better distinguish political organizations from legitimate social
welfare groups. Some half-dozen California legislators have also
proposed campaign finance disclosure bills.

In July, Rhode Island enacted a DISCLOSE-style transparency bill.
Similarly, New York Attorney General Eric Schneiderman has proposed
regulations that would require 501(c)(4) social welfare groups to
report what percentage of their expenditures go to elections, and
who finances them.

"In an election, voters have the right to know what special
interests are trying to influence elections before they cast their
ballots," Schneiderman said in an email. …